European hotel valuations drop 15 per cent

Eloise Hanson Eloise Hanson Uploaded 06 April 2021

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EU: According to the European Hotel Valuation Index (HVI) compiled by HVS, European hotel values saw average declines between five and 15 per cent over the past 12 months compared to the previous year.

2019 marked a decade of hotel value rises across Europe, posting an average three per cent increase with some properties in Southern Europe experiencing seven per cent rises. The various lockdowns throughout 2020 however resulted in the majority of the continent’s hotels closing for business. 

RevPAR fell by around 70 per cent compared to 2019, with around 60 per cent of hotels experiencing a decline in value of between five and 15 per cent. Only a small number of properties saw a larger decline in value or a slight increase.

Mattia Cavenati, associate at HVS London, said: “The impact of the pandemic on cash flows and profits has been dramatic, although government support and payroll subsidies helped to soften the blow. All tiers of hotel have been affected but particularly the upscale and luxury properties as they tend to be more exposed to group and convention demand as well as international visitors.”

Hotels located in gateway cities (for example Northern and Western Europe) experienced less of a decline than those located outside of central markets (such as Eastern Europe). 

Simon Hultén, senior associate with HVS London, said: “While full recovery is expected in the sector, newly found operational efficiencies such as more agile workforces, greater use of technology and the repurposing of space will enhance operating leverage as demand and revenues recover. Values will be enhanced by yield-hungry funds lining up capital, which will create competition and help sustain selling prices.”

Sophie Perret, senior director of HVS London, added: “Hotels with weak business propositions will likely have to be repurposed or reinvented but strong investor interest and weight of capital continue to chase assets with good potential and in strong locations, driving demand for deals that are realistically priced and limiting the degree of price discounting.”

The 2020 European Hotel Valuation Index can be downloaded here. 

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